The following is a December 31, 2018, post-closing trial balance for Georgetown, Inc. .

Additional information:

1. The investment account includes an investment in common stock of another corporation of $30,000 which management intends to hold for at least three years. The balance of these investments is intended to be sold in the coming year.
2. The land account includes land which cost $25,000 that the company has not used and is currently listed for sale.
3. The cash account includes $15,000 restricted in a fund to pay bonds payable that mature in 2021 and $23,000 restricted in a three-month Treasury bill.
4. The notes payable account consists of the following:

1. a $30,000 note due in six months.
2. a $50,000 note due in six years.
3. a $50,000 note due in five annual installments of $10,000 each, with the next installment due February 15, 2019.

5. The $60,000 balance in accounts receivable is net of an allowance for uncollectible accounts of $8,000.
6. The common stock account represents 100,000 shares of no par value common stock issued and outstanding. The corporation has 500,000 shares authorized.

Required:
Prepare a classified balance sheet for Georgetown as of December 31, 2018.

  
Hemming Co. reported the following current-year purchases and sales for its only product.
    

Exercise 5-7 Perpetual: Inventory costing methods-FIFO and LIFO LO P1

Required:
Hemming uses a perpetual inventory system.
  
1. Determine the costs assigned to ending inventory and to cost of goods sold using FIFO.
2. Determine the costs assigned to ending inventory and to cost of goods sold using LIFO.
3. Compute the gross margin for FIFO method and LIFO method.

Perception"  Please respond to the following:

• You have been immersed in the world of managerial accounting (i.e., cost accounting) for seven (7) weeks. At this point in the course, what is your assessment of cost/managerial accounting from a provider perspective?
• Now imagine that you are the user, not the provider. Explain whether or not your assessments have changed, and explain why or why not. As a user, describe how you would use two (2) of the variances calculated to make better management decisions.

"Off Balance Sheet Financing"

Harold Walker is CEO and Owner of Walker Enterprises (WE), a company that has shown strong and consistent growth over the years. However, WE is struggling with cash flow issues and Harold is looking for a loan and/or line of credit to bolster his company. The problem is that the company’s debt to equity ratio is already high and he knows it will be challenging to find a bank willing to lend him additional funds. Fred, his CFO, has come up with an idea. A large portion of the company’s debt is tied up in the mortgage of their five-story office building. Fred has suggested moving this debt to “off balance sheet” by creating an SPV (Special Purpose Vehicle) that owns the building on behalf of the company and then leases it back. This results in WE entering into an operating lease off the balance sheet and recording only the relatively small monthly “rent” as an operating expense. Fred says this will significantly increase the company’s liquidity and present a balance sheet that will be much more attractive to any potential lenders.

Fred has assured Harold this is legal and common. This arrangement does not feel right to Harold.

• What additional information should Harold request?
• What additional reservations or concerns would you have?

ecton Labs, Inc., produces various chemical compounds for industrial use. One compound, called Fludex, is prepared using an elaborate distilling process. The company has developed standard costs for one unit of Fludex, as follows:

During November, the following activity was recorded related to the production of Fludex:

1. Materials purchased, 10,500 ounces at a cost of $216,825.

2. There was no beginning inventory of materials; however, at the end of the month, 2,600 ounces of material remained in ending inventory.

3. The company employs 20 lab technicians to work on the production of Fludex. During November, they each worked an average of 180 hours at an average pay rate of $14.00 per hour.

4. Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs during November totaled $7,000.

5. During November, the company produced 3,700 units of Fludex.

Required:

1. For direct materials:

a. Compute the price and quantity variances.

b. The materials were purchased from a new supplier who is anxious to enter into a long-term purchase contract. Would you recommend that the company sign the contract?

2. For direct labor:

a. Compute the rate and efficiency variances.

b. In the past, the 20 technicians employed in the production of Fludex consisted of 8 senior technicians and 12 assistants. During November, the company experimented with fewer senior technicians and more assistants in order to reduce labor costs. Would you recommend that the new labor mix be continued?

3. Compute the variable overhead rate and efficiency variances.

1) For direct materials, compute the price and quantity variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Materials quantity variance=? and U or F

Materials price Variance=? and U or F

2) For direct materials, the materials were purchased from a new supplier who is anxious to enter into a long-term purchase contract. Would you recommend that the company sign the contract?

yes or no

3) For direct labor, compute the rate and efficiency variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Labor efficiency variance=? and U or F

Labor rate variance= ? and U or F

4) In the past, the 20 technicians employed in the production of Fludex consisted of 8 senior technicians and 12 assistants. During November, the company experimented with fewer senior technicians and more assistants in order to reduce labor costs. Would you recommend that the new labor mix be continued?

yes or no

5) Compute the variable overhead rate and efficiency variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Variable overhead rate variance=? and F or U

Variable overhead effiency variance=? and F or U

The Regal Cycle Company manufactures three types of bicycles—a dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow:

*Allocated on the basis of sales dollars.

Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear out.

Required:

1. What is the financial advantage (disadvantage) per quarter of discontinuing the racing bikes?

2. Should the production and sale of racing bikes be discontinued?

3. Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-run profitability of the various product lines.

What is the financial advantage (disadvantage) per quarter of discontinuing the racing bikes?

Should the production and sale of racing bikes be discontinued? Yes or No

Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-run profitability of the various product lines.

Laker Company reported the following January purchases and sales data for its only product.

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption costing income statement for the most recent period is shown:

Hi-Tek produced and sold 60,300 units of B300 at a price of $21 per unit and 12,500 units of T500 at a price of $39 per unit. The company’s traditional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company’s two product lines is shown below:

The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek’s ABC implementation team concluded that $54,000 and $105,000 of the company’s advertising expenses could be directly traced to B300 and T500, respectively. The remainder of the selling and administrative expenses was organization-sustaining in nature. The ABC team also distributed the company’s manufacturing overhead to four activities as shown below:

Required:

1. Compute the product margins for the B300 and T500 under the company’s traditional costing system.

2. Compute the product margins for B300 and T500 under the activity-based costing system.

3. Prepare a quantitative comparison of the traditional and activity-based cost assignments.

Compute the product margins for the B300 and T500 under the company’s traditional costing system. (Round your intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.)

Compute the product margins for B300 and T500 under the activity-based costing system. (Negative product margins should be indicated by a minus sign. Round your intermediate calculations to 2 decimal places.)

Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Round your intermediate calculations to 2 decimal places and "Percentage" answers to 1 decimal place and and other answers to the nearest whole dollar amounts.)

Tami Tyler opened Tami’s Creations, Inc., a small manufacturing company, at the beginning of the year. Getting the company through its first quarter of operations placed a considerable strain on Ms. Tyler’s personal finances. The following income statement for the first quarter was prepared by a friend who has just completed a course in managerial accounting at State University.

Ms. Tyler is discouraged over the loss shown for the quarter, particularly because she had planned to use the statement as support for a bank loan. Another friend, a CPA, insists that the company should be using absorption costing rather than variable costing and argues that if absorption costing had been used the company probably would have reported at least some profit for the quarter.

At this point, Ms. Tyler is manufacturing only one product—a swimsuit. Production and cost data relating to the swimsuit for the first quarter follow:

Required:

1. Complete the following:

a. Compute the unit product cost under absorption costing.

b. What is the company’s absorption costing net operating income (loss) for the quarter?

c. Reconcile the variable and absorption costing net operating income (loss) figures.

3. During the second quarter of operations, the company again produced 31,100 units but sold 34,100 units. (Assume no change in total fixed costs.)

a. What is the company’s variable costing net operating income (loss) for the second quarter?

b. What is the company’s absorption costing net operating income (loss) for the second quarter?

c. Reconcile the variable costing and absorption costing net operating incomes for the second quarter.

1. How does a parent company account for its investments in subsidiaries past the acquisition date (in subsequent years) on its own books ? What are some of the additional documents an accountant will have to prepare in addition to the consolidated balance sheet subsequent to an acquisition?

James Supply Co. has the following transactions related to notes receivable during the last 2 months of 2013. Nov. 1 Loaned $20,000 cash to Mary Perkins on a 1-year, 12% note. Dec. 11 Sold goods to Eminem, Inc., receiving a $9,000, 90-day, 8% note. The goods cost $6,500. Dec. 16 Received a $8,000, 6-month, 9% note in exchange for Mick Jagger’s outstanding accounts receivable. Dec. 31 Accrued interest revenue on all notes receivable.(assume 360 days per year) Instructions (a) Journalize the transactions for James Supply Co. (b) Record the collection of the Perkins note at its maturity on November 1, 2014.

After the tangible assets have been adjusted to current market prices, the capital accounts of Brad Paulson and Drew Webster have balances of $45,000 and $60,000, respectively. Austin Neel is to be admitted to the partnership, contributing $30,000 cash to the partnership, for which he is to receive an ownership equity of $35,000. All partners share equally in income. Required: A. On December 31, journalize the entry to record the admission of Neel, who is to receive a bonus of $5,000. Refer to the Chart of Accounts for exact wording of account titles. B. What are the capital balances of each partner after the admission of the new partner? C. Why are tangible assets adjusted to current market prices, prior to admitting a new partner?

13. Narion, Inc. has a 20% required rate of return. Three managers have presented three potential projects to increase income over the next ten years, each with their preferred measure. Project A was reported to have an NPV of $(2,460). Project B was reported with an IRR of 28%. Project C was reported to have a payback period of 23 years. With which of these projects should Narion move forward?

Haas Company manufactures and sells one product. The following information pertains to each of the company’s first three years of operations:

During its first year of operations, Haas produced 60,000 units and sold 60,000 units. During its second year of operations, it produced 75,000 units and sold 50,000 units. In its third year, Haas produced 40,000 units and sold 65,000 units. The selling price of the company’s product is $72 per unit.

Required:

1. Compute the company’s break-even point in unit sales.

2. Assume the company uses variable costing:

a. Compute the unit product cost for Year 1, Year 2, and Year 3.

b. Prepare an income statement for Year 1, Year 2, and Year 3.

3. Assume the company uses absorption costing:

a. Compute the unit product cost for Year 1, Year 2, and Year 3.

b. Prepare an income statement for Year 1, Year 2, and Year 3.

Denton Company manufactures and sells a single product. Cost data for the product are given:

The product sells for $54 per unit. Production and sales data for July and August, the first two months of operations, follow:

The company’s Accounting Department has prepared the following absorption costing income statements for July and August:

Required:

1. Determine the unit product cost under:

a. Absorption costing.

b. Variable costing.

2. Prepare variable costing income statements for July and August.

3. Reconcile the variable costing and absorption costing net operating incomes.